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§ 1811. Cost Components of Dairy Processing -- Manufacturers, Distributors and Handlers.

3 CA ADC § 1811Barclays Official California Code of Regulations

Barclays California Code of Regulations

Title 3. Food and Agriculture

Division 3. Economics (Refs & Annos)

Chapter 3. Milk Stabilization and Marketing of Milk and Dairy Products

Subchapter 1. Unlawful Practices in Marketing Milk and Dairy Products

Article 1. General Provisions

3 CCR § 1811

§ 1811. Cost Components of Dairy Processing -- Manufacturers, Distributors and Handlers.

Currentness

In determining whether a manufacturer, distributor, or handler sold milk, cream, or any other dairy product(s) below cost, the Department shall evaluate the total consideration paid or exchanged for the raw product and the total expenses incurred and allocated for manufacturing, processing, handling, sale, and delivery.

(a) Milk processing and distributing costs shall be calculated using cost element categories which include, but which are not limited to, those specified below. All costs and expenses incurred, and any non-cash or other value received or given must be included in cost calculations.

(1) Ingredient Cost. Procurement of raw milk and other ingredients including, but not limited to additives and flavorings, premiums, service charges, federal, state, or local assessments.

(2) Labor Costs. All salaries, wages, benefits, and other compensation for workers and staff.

(3) Packaging Costs. All costs for purchasing packaging materials and for packaging products for sale.

(4) Shipping and Freight/Transportation/Storage Expense. All costs related to storing and transporting products.

(5) Waste, Shrinkage, Spoilage. All costs or values related to ingredient and finished product waste, shrinkage, spoilage.

(6) Manufacturing and Administrative Costs. All fixed and variable costs directly related to processing, manufacturing, sales and distribution of products, and associated administrative activities. For handlers, manufacturers, and distributors with more than one product line, costs should be allocated to each line using an allocation method that is both consistently applied and which is consistent with Generally Accepted Accounting Principles.

(A) Fixed Costs. Land and property expenses, property taxes, financing, leases, insurance, and other costs that are commonly considered fixed.

(B) Variable Costs. Plant expenses incurred to manufacture or produce product lines, including maintenance and testing of plant and equipment, non-capitalized furniture and fixtures, supplies, utilities, taxes, and other costs that are commonly considered variable.

(7) Asset Charges. Costs related to capital equipment and assets including depreciation, amortization, and capital repairs.

(b) Allocation methods selected for distributing costs must be fair, consistent with Generally Accepted Accounting Principles, and consistently applied.

(c) Other Costs. Handlers, manufacturers and distributors must capture all other costs, benefits or value resulting from activities which are directly related to sales of dairy products. These costs include, but are not limited to, promotions, advertising, coupons, slotting allowances, sweepstakes, or any other sales promotions or incentives, as well as the following:

(1) Low interest loans. For any low interest loan provided to or guaranteed on behalf of a customer, the handler, manufacturer or distributor must recognize as a cost the value of the portion of the interest rate that is below market, the value of any terms that are more favorable than commercially available, or the value of the guarantee afforded.

(2) Discounts or rebates on non-dairy items. For any product other than regulated dairy products that are sold at a discount greater than that afforded to other customers or when non-dairy products are given free of charge to a customer as a direct or indirect part of the sale of a dairy product, the value of the discount or of the free product must be captured and included in the cost calculations.

(3) Payments made on behalf of the customer. Any payments or debts forgiven on behalf of a customer as a direct or indirect consequence of a dairy product must be captured and included in the cost calculations.

(4) Equipment. For any equipment given or loaned to a customer without a related rental fee, the manufacturer or distributor must capture and include in its costs the value of the gifted equipment or the value of the rental payments foregone.

(5) Advertising and Promotions. For any advertising campaign, promotion, giveaway, coupons, or other incentives, the costs related to that campaign must be recognized as a cost following the provisions established in Article 3 of this subchapter.

(6) Gifts, Prizes, Sales Awards. The value of any gifts, prizes, sales awards, vacations, trips, gift certificates, cash or items of property given to any customer as a direct or indirect consequence of a sale of a dairy product must be included in the cost calculations.

(7) Expenses Foregone. The value of any expenses foregone in connection with the sale of any dairy product must be included in the cost calculations.

(8) Special or Prepaid Account. Any transfer of anything of value in connection with the sale of any dairy product, including special accounts or funds used to reduce the invoice cost of a dairy product must be included in the cost calculations.

(d) Retention of Data. Handlers, manufacturers, and distributors are responsible for retaining sufficient records to demonstrate compliance with Article 4, Chapter 1, Part 3, Division 21 of the Food and Agricultural Code and this subchapter.

Credits

Note: Authority cited: Sections 407 and 61341, Food and Agricultural Code. Reference: Sections 61382, 61383, 61384, 61441, 61442 and 61443, Food and Agricultural Code.